What is supply chain management?
Supply chain management is an integrated methodological approach that heavily uses management approaches such as operations management and logistics management. It is inclusive of all activities of materials in the production of goods and services ranging from the storage of raw materials, processing them for production and supplying them to the customers.
Supply chain management is overseeing the flow of information, materials and finances within and across companies from the point of origin to the point of consumption.
Supply chain management is a cross-functional approach which organizes the entire business process through a chain of multiple companies who specializes in their concerned roles. These companies are business partners that focus on only a few key strategic activities.
The active management of supply chain activities maximizes the customer value and enables sustaining a competitive advantage over other companies.
How does supply chain management work?
It increases the number of organizations involved in the process of manufacturing goods and information providing.
It operates through interlinked channels and networks of business nodes which it uses to reduce the ownership of materials by distributing activities across various companies.
Companies outsource to other organizations the activities or processes they specializes in so they can be performed more efficiently and cost effectively.
What are the three types of flow in supply chain management?
Supply chain management is constituted of activities such as product development, sourcing, production, logistics and information system required to coordinate these activities. The organizations involved in supply chain are connected together through three kinds of flows which include flow of materials, information and finances.
Flow of materials and finances are physical flows which involve the transformation, movement, and storage of goods and materials and transaction of capitals. They are the most visible part of the supply chain.
Flow of information allows the various supply chain partners to coordinate their plans and control the flow of goods and material up and down the supply chain.
According to the Council of Supply Chain Management Professionals (CSCMP), “Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers.”
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